Following the UK general election, attention has shifted to the country's national semiconductor strategy. An upcoming report urges the new government to conduct a comprehensive review of the semiconductor supply chain to ensure effective resource allocation.
The report underscores the UK's significant dependence on the United States and expresses concerns about Chinese investments in the sector. It advocates for closer collaboration with the European Union to enhance supply chain resilience.
Gaps in the National Semiconductor Strategy
As reported by The Register, after considerable delays, the previous UK government finally unveiled its National Semiconductor Strategy in May 2023. The strategy emphasizes the UK's strengths in intellectual property (IP), research and development (R&D), design, and compound semiconductors, with a planned investment of GBP1 billion (US$1.3 billion) over the next decade.
The UK Semiconductor Handbook, published by the London School of Economics in October 2023, identifies five key industry clusters: South Wales for compound semiconductors, Cambridge for academic institutions and science parks, Bristol for chip design, Scotland for photonics and prototyping, and the Northeast for advanced materials and compounds.
However, a new report provisionally titled "Towards A Data-Driven UK Semiconductor Strategy," co-authored by the University of Sussex and King's College London, critiques the current strategy.
The report notes that, unlike the United States and the European Union, the UK has not conducted a comprehensive investigation into its semiconductor supply chain, relying instead on general market analysis and feedback from individual industries. This approach risks overlooking vital details in ownership structures and supply chain dynamics.
The report also criticizes the exclusion of the Midlands industrial cluster, despite its significant contribution to the semiconductor industry. Statistics reveal that 24% of jobs and 18% of revenue from the UK's 61 major semiconductor companies come from the Midlands.
Without a complete understanding of the semiconductor ecosystem, including overlooked regions and emerging sub-sectors, the report warns that the UK's strategy may lead to misallocated resources and missed growth opportunities. It recommends that the new government conduct a comprehensive review.
US and Chinese interests in UK semiconductor firms
An analysis of the 61 major semiconductor companies shows that US investors own an average of 27.5% of shares, the highest of any country. Additionally, 54% of these companies' customers and 53% of suppliers are based in the United States. The report warns that overreliance on a single country could jeopardize supply chain resilience.
Concerns about Chinese investments are also raised. The UK government had previously reversed the acquisition of Newport Wafer by Nexperia, a subsidiary of China's Wingtech, citing national security concerns. The South Wales-based plant was later acquired by US company Vishay in March 2024 after receiving conditional government approval.
The report details other Chinese investments, such as Beijing-based venture capital firm Canyon Bridge's ownership of Imagination Technologies and the Chinese state-owned CRRC group's ownership of Dynex Semiconductor Limited. It suggests the creation of a dedicated unit to monitor foreign investments in high-tech sectors, not just major acquisitions but also the accumulation of smaller investments.
Furthermore, Brexit has created trade barriers, regulatory discrepancies, and restrictions on talent mobility, complicating the role of EU countries in UK semiconductor production networks. Most UK companies are also ineligible for direct subsidies under the European Chips Act.
Given the uncertainties surrounding the upcoming US presidential election in November and potential supply chain risks, the report advises the UK government to consider measures to strengthen supply chain resilience and improve semiconductor trade relations with EU member states, including simplifying customs procedures.
